Head of Macroeconomic Research
Summary: In today’s ‘Macro Chartmania’, we focus on the U.S. 30-year mortgage rate. In January 2022, it stood at 3.1%. It is now above 4%. This is only the beginning. Many U.S. households are not able to buy at the 4% rate anymore. This worsens the issue of housing affordability in the United States.
Access this week's full edition of Macro Chartmania composed of more than 100 charts to track the latest macroeconomic and market developments. All the data are collected from Macrobond and updated each week.
Housing affordability continues to be a major challenge in the United States. Home prices keep jumping (+15% year-over-year to $357,300 on average) while sales continue to fade and the inventory of unsold homes increases. Buyers are trapped. They face higher difficulties resulting both from sustained price increases and rising mortgage rates. Many of them who managed to get a 3% mortgage rate are no longer able to buy at the 4% rate. Exactly one year ago, the average rate on the 30-year loan was at around 3%. It now stands at 4.5%. This is the highest level since December 2018. The average rate on 15-year, fixed-rate mortgages, which is popular among those refinancing their homes, is up too. It is hovering around 3.4% instead of 3.09% one week ago. This is only the beginning. Mortgage rates are highly correlated to the Federal Reserve’s benchmark short-term interest rate. We expect the Federal Reserve to hike the rate by 400 basis points during this cycle in order to fight inflation. This would be similar to the previous tightening cycles which took place since 1985. We could, therefore, see the 30-year mortgage rate beyond 5%. This would be the first time since 2010. Social consequences would be massive (homebuyers dropping out from the market, breach of the social contract etc.). Owning a home is now a distant dream for a growing number of Americans.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
